Sect. 571. not of material facts, it cannot avail a subsequent one; and if it was of such a nature that it ought to have put the first underwriter on further inquiry, it will be equally imputed to the negligence of the subsequent underwriter that no such inquiry was made (y). (2) Formerly the rule was only applicable to the policy. (3) The rule includes only representations that lower the terms. The rule not favoured. 572. Until the decisions under 30 Vict. c. 23, the applicability of this rule was restricted to the policy, because the slip could not even be given in evidence for any purpose whatever (≈): but since the slip may be given in evidence whenever it is material (a), the rule becomes applicable to either the policy or the slip, and will probably, in consequence of the state of facts, be more frequently applied to the latter than the former. 573. A still further limitation of the same rule is, that it only applies where the tendency of the representation is to induce the underwriters to take the risk on lower terms. Where the first underwriter was called to prove a representation made to him, the tendency of which would have been to increase the estimate of the risk, Lord Tenterden decided, at Nisi Prius, that this evidence was not admissible as against a subsequent underwriter (b). Even under these limitations the English Courts have regarded the rule with great jealousy, and on many occasions have expressed their dissatisfaction with it. Heath, J., on one occasion said, that "the evidence had been admitted rather on precedent than on reason" (c); and Lord Ellenborough" Whenever the question comes distinctly before the Court, whether a communication to the first underwriter is virtually a notice at all, I shall not scruple to remark that (y) Barber v. Fletcher (1779), 1 to whom a representation had been Dougl. 306. made stood first in order on the slip though not on the policy. (z) Marsden v. Reid (1803), 3 East, 572. In this case the names of the underwriters appeared in a different order on the policy from that on the slip; but the slip was not admissible in evidence, as the law then stood, to show that the underwriter (a) See ante, ss. 34 et seq. (b) Robertson v. Majoribanks (1819), 2 Stark. N. P. 573, 575; 2 Duer, Ins. 779. (c) Brine v. Featherstone (1813), 4 Taunt. 869. the proposition is to be received with great qualification; it Sect. 573. may depend on the time and circumstances under which the communication was made; but on the mere naked unaccompanied fact of one name standing first on the policy, I should not hold that a communication made to him was virtually made to all the subsequent underwriters;" and his Lordship said that the question was one of such magnitude that if it should arise he should direct it to be put on record for the opinion of all the judges (d). first under avoids the contract. 574. Of course, if the subscription of the first underwriter Where the is obtained under a secret agreement or understanding that writer is a it is not to be binding, and for the sole purpose of leading duck," this mere "decoy others to insure, the exhibition of the policy or slip thus subscribed is justly regarded as a fraud on the subsequent underwriters, and on that ground avoids the policy (e). This rule, it is said, will extend to the case of any prior underwriter, though his name may not be first in the policy (ƒ). (d) In Forester v. Pigou (1813), 1 M. & S. 13. (e) Whittingham . Thornburgh (1690), 2 Vernon, 206; Wilson v. Ducket (1761), 3 Burr. 1361; see also the observations of Lord Kenyon in Sibbald v. Hill (1814), 2 Dow, 262. The first underwriter in such (f) 2 Duer, 679. VOL. 1. U U 658 CHAPTER II. CONCEALMENT. SECT. SECT. Definition and general principles. 575. CONCEALMENT, in the law of insurance, is the suppression of, or neglect to communicate, a material fact within the knowledge of one of the parties which the other has not the means of knowing, or is not presumed to know. A material fact is one which is calculated, if communicated to the other of the parties, to induce him either to refrain altogether from the contract or not to enter into it except on more favourable terms (a). Defined in these terms, the principle is equally applicable to the assured and the underwriter. The contract is one uberrimæ fidei, and on the plainest principles of equity such a contract which one party has thus been induced to enter upon from his ignorance of the thing concealed shall not be enforced against him by the other who has concealed it. Whether such suppression of the truth arise from fraud (that is, from a wilful intention to deceive for the party's own benefit), or merely from mistake, negligence, or (a) See post, s. 589; 1 Marshall, Ins. 463; 1 Phillips, s. 531; and per Tindal, C. J., in Elton v. Larkins (1832), 5 C. & P. 392. accident, the consequences will be the same (b). The ground, Sect. 575. in short, on which the policy is avoided is that the party has been, in fact, deceived, not that the other party has intended to deceive him. on which policy. As we have seen in the preceding chapter, it is a condition Principles of this contract, implied by law as a matter of public policy, concealment that the contract is free from misrepresentation or conceal- avoids the ment; and if there is a breach of this condition, either by misrepresentation or concealment of a material fact, the contract is voidable. Fraud in its effect goes beyond the condition; for if fraud be present in either form, whether of misrepresentation or concealment, it avoids the policy, although the subject misrepresented or concealed be not a material fact. Generally speaking, as the facts lie most within the peculiar knowledge of the assured, it is the underwriter who avails himself of the defence of concealment; yet he, as well as the assured, is bound to disclose all circumstances, peculiarly within his own knowledge, in any decree affecting the risk. Thus, if the underwriter, at the time of subscribing the policy, knew that the ship had arrived safe, the contract will be void as to him, and an action will lie against him to recover back the premium (c). 576. In order that a concealment should have the effect of Time of concealment. avoiding the policy, it must have taken place at the time of making the contract; and for the reasons already stated in respect of Representations (d), the contract is now regarded by the Courts as complete when the slip is initialed by the underwriter (e). Consequently anything coming to the know L. R. 9 Q. B. 531, 537. (c) Per Lord Mansfield in Carter v. Boehm (1766), 1 W. Bl. 594; 3 Burr. 1909; see also 3 Benecke, System des Assecuranz, c. x. pp. 90, (b) Carter v. Boehm (1766), 3 Burr. 1909; Ratcliffe v. Shoolbred (1780), 1 Park, Ins. 413; 1 Marshall, Ins. 464; Shirley v. Wilkinson (1786), 1 Dougl. 206; Thompson v. Buchanan (1782), 4 Br. P. C. 482; per Willes, J., Anderson v. Pacific Fire & Mar. Ins. Co. (1872), L. R. 7 C. P. 65, 68; per cur. Ionides v. Pender (1874), 91. (d) Ante, ss. 522, 567. (e) When, however, the policy tendered to the underwriter and exe Sect. 576. ledge of either party after that, however material it may be, need not be communicated to the other, notwithstanding a policy has not yet been executed in accordance with the slip (f). When policy altered or rectified. In case of Policy effected by an agent in ignorance of a material Where a broker was instructed to effect a policy on goods, and by mistake effected one on the ship, and the underwriter afterwards agreed to a rectification of the policy, it was held that the broker was bound to disclose a material fact which had come to his knowledge between the execution of the policy and its rectification (g). The reason, as Duer points out, is that the underwriter was under no obligation to make the alteration. By doing so he was really making a new and distinct insurance. If on the other hand the alteration does not make a new contract, but merely declares the true meaning of the contract already concluded, this reasoning does not apply, and there is no necessity to disclose the information acquired after the making of the contract (h). It has been pointed out by Duer, and agrees with what has been said, that the duty of an underwriter who effects a reinsurance to communicate his information relates to the time when he effects the re-insurance, not to the time when the original insurance was made. Therefore he must disclose material information which has come to his knowledge between the making of the original contract and the making of the contract of re-insurance (i). 577. If an agent, in ignorance of a loss that has happened, effect an insurance for his principal who knew of the loss at the time the policy was effected, but not in time to counter cuted by him does not correspond (f) Ionides v. Pacific Fire & Mar. (1872), 7 Q. B. 517; Cory v. Patton (1872), L. R. 7 Q. B. 304; Lishman v. Northern Maritime Ins. Co. (1873), L. R. 8 C. P. 216; (1875), 10 C. P. 179. (g) Sawtell v. Loudon (1814), 5 Taunt. 358. (h) 2 Duer, 427. |